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Month: December 2016

In preparation for a PeopleOps dinner at First Round Capital, I was asked to share 1-2 questions that will help drive the group conversation forward. The timing was right, as I was already in a more reflective mode, and I ended up going a bit overboard and submitting more than two questions. The ones that we did get to cover during dinner drove some really interesting conversations in the group.

I’d like to share a more refined version of them with this audience, as these are questions that I’m interested in exploring in this publication in the upcoming year. Right now, I’m not intending to do any direct focused feedback aimed at answering them, as I suspect just keeping them top-of-mind, will end up surfacing some interesting insights from my standard day-to-day work and readings. Maybe that will change as the year progresses and I’ll start tackling them more directly.

The overall tone may come across as contrarian, but what I’m really advocating for is a more first-principled approach to answering them. Many PeopleOps theories and practices haven’t fully caught up to everything we’ve learned about “what it means to be human” in the last 20-30 years, and there’s very strong inertia around some key “best” practices. That being said, I’m skeptical that throwing out everything that exists today and rebuilding it from scratch is the right answer. At their core, many of them contain some fundamental truths that still hold true, so the risk of “throwing out the baby with the bathwater” is high. We should proceed with caution.

What does the future of the firm really looks like? The recent Benkler piece is the best stab I’ve seen in answering this question, but it still stays super high level. But if the future of the firm revolves around “building communities of meaning around economic collaboration” – what does that really look like?

How do we find and attract the best talent to our organizations? The ineffectiveness of resumes is just the tip of the iceberg. We need to take a deeper look at the entire recruiting process: from the way we figure out what we’re really looking for, through the way we position ourselves against and interact with the talent market to a more holistic approach for thinking about motivation and the way that the financial incentives fit into this broader picture.

How do we effectively manage deep diversity? the current diversity discussion seems to be focused around the aspects of diversity that are easiest to measure (gender and ethnicity) and within that focus, on the business practices that are easiest to change (recruiting). But the diversity that we truly seek goes deeper than that, and actually getting value out of it goes beyond creating “psychological safety”…

What will we find if we start peeling the “employee engagement” onion? Keeping in mind that it was invented by a company that’s deeply in the business of “fixing” it, but wasn’t successful in doing so in the last 3 decades. I have yet to have seen a real randomized controlled test on this, conducted by an independent 3rd-party.

How can we up-level development programs? Can a program that’s purely focused on the “outer game” (skills and competencies: presentation skills, listening skills, giving feedback, having career conversations) without any attempt the change the “inner game” (the way people make sense of the world around them) have any transformational impact on the organization?

Is there a performance-development Heisenberg Principle? Can we accurately measure performance without hindering our ability to measure development/learning? What is the right balance to strike between the two?

What are the various paths from Patriarchy to Partnership? In my opinion, this is a better, more nuanced description of what many people mean when they talk about getting a way from hierarchical organizations or becoming more self-organizing/self-managing. So far, I have yet to have seen a comprehensive alternative to the “managerial hierarchy”. Holacracy comes close, but is still incomplete and has some significant deficiencies. How do we un-bundle all the functions that the current hierarchy supports? and what are the alternative structures that can fulfill them?

This is my 3rd (calendaric) year writing this publication and following the tradition I started last year, it’s time for another annual reflection on the learnings I shared. Beyond the broad thematic focus of this publication, I did not have any pre-planned specific themes in mind as I was writing posts. I keep a running list of topics and articles that I find myself thinking about, so taking time to reflect on the whole year and identifying the emergent themes is a really fun exercise. For me at least 🙂

I started this year with some existential concerns about this publication. I wasn’t sure whether this habit will survive the substantial professional pivot I made at the beginning of year. But it turned out these concerns were unsubstantiated. On the contrary, things that happened at work enabled me to write richer, more in depth posts; while topics that I covered in these posts ended up informing actions I’ve taken at work. Your classical win-win.

Last year, the themes ended up being: “Org and Role Design”, “Systems and Processes”, “Culture, Values and Principles”, and “Leadership”. While the themes are never a perfect fit for the content, I also try to avoid brute-forcing the content fit by always having an “Other/Misc” category.

While last year’s themes are not a terrible fit for this year’s topics, I decided to go with slightly more nuanced themes:

Future of the firm – macro takes on the core of this form of organization in light of other macro trends

Bizzzzzness – org design is a means to promote the broader purpose of the organization. But there are other lenses to look at the same problem which serve as important context that feed into effective org design:

It is often the case that in our push for change, we tend to go overboard and “throw the baby with the bathwater”. One of the hottest trends in People Operations, the overhaul (and sometime the complete removal) of any sort of performance assessment and management systems is not immune to that common pitfall.

The extreme argument posits that since we are all fully-grown adults, we have a clear understanding of our strengths and weaknesses, and therefore completely capable of driving our own professional development on our own. The system, or the organization, should just take its cue from us, and support us in pursuing whichever direction we see fit.

In this 40-page meta-analysis David Dunning, Chip Heath and Jerry Suls clearly lay out the challenges that prevent us from accurately self-assess our abilities, in making decisions about our health, our education and our work.

If you’re not up to reading the 40-pager, here’s an outline of the most relevant sections of their paper to the reader of this publication, copied almost verbatim from the paper with minor editorial changes to ease readability:

Empirical evidence exists for some major flaws of in people ability to self-assessment.

Overall, there is a low correlation between perception and reality:

In the workplace, the correlation between how people expect to perform and how they actually perform hovers around .20 for complex tasks

Some domains produce higher correlations than others. In athletics, where feedback tends to be constant, immediate, and objective, the typical correlation was .47. In the realm of complex social skills, where feedback might be occasional and is often delayed and ambiguous, it tended to be much lower (e.g., .04 for managerial competence and .17 for interpersonal skills)

Peer ratings of leadership, rather than self-ratings, predict which naval officers will be recommended for early promotion.

Specifically, unrealistic optimism is pervasive:

Above-average effects – People, on average, tend to believe themselves to be above average—a view that violates the simple tenets of Mathematics.

Overestimation of the likelihood of desirable events – People overestimate their ability to bring about personally desirable events. People also overestimate the likelihood that their own future actions will be socially desirable, even though their predictions regarding their peers’ behavior turn out to be more accurate.

Underestimation of task-completion times – People consistently overestimate how easily they can complete tasks (as measured by time or money), a phenomenon known as the planning fallacy.

Overconfidence in judgment and prediction – People place too much confidence in the insightfulness of their judgments, overestimating the chances that their decisions about the present are sound and that their predictions about the future will prove correct. This phenomenon is known as the overconfidence effect.

The psychological mechanisms that underlie flawed self-assessments can be grouped under two major themes. The first theme is that people typically do not possess all the information required to reach perfectly accurate self-assessments. The second theme is that even when people do have valuable information that would guide them toward appropriate self-evaluations, they often neglect it or give it too little weight; thus, they make potentially avoidable errors.

Explanations for the above-average effect:

Information deficits – The Double Curse of Incompetence. People often do not have the knowledge and expertise necessary to assess their competence adequately.

Unknown errors of omission – Although people trying to solve a problem may find it easy to consciously critique the solutions they generate, by definition they are not aware of solutions they could generate but miss, that is, their errors of omission.

Uncertain lessons from feedback – People receive incomplete feedback about their actions, which can lead them to harbor inflated views about the wisdom of their actions.

The ill-defined nature of competence – Perhaps the most fundamental reason for people to have incomplete knowledge of their competence is that in many domains, what it takes to succeed is hard to define.

Information neglect – People misjudge themselves relative to others because they ignore crucial information, and this neglect can produce the above-average effect and, on occasion, its direct opposite.

Exclusive focus on the self with neglect of others – People’s comparative judgments often involve very little comparison. When evaluating their skill vis-a`-vis their peers’, people are egocentric, thinking primarily of their own behaviors and attributes and ignoring those of others.

Controllability and privacy of traits – People think of themselves as superior to their peers when thinking about traits that are construed as controllable,but not so much when thinking about uncontrollable traits. People consider themselves more cooperative and self-disciplined than others (all controllable qualities), but not necessarily more creative or lively. People tend to believe that they possess traits more than their peers to the extent that those traits tend to be expressed internally. For example, people tend to think they are more self-conscious, self-critical, and choosy than their peers, but not that they are more aggressive, poised, or wordy, traits that are more external in their expression. The neglect of the internal lives of others can result in a phenomenon known as pluralistic ignorance, in which people believe they uniquely possess a deviant opinion, whether desirable or not, when in reality most people in the community privately share the same opinion.

Explanations for overly optimistic predictions of events:

Information deficits – Unknown situational details: People often make overly confident predictions, typically optimistic ones but not necessarily so, because they fail to correct for the fact that the details of future situations are often unknown or unpredictable, even though those details may matter. As well as imperfect understanding of emotion, visceral drives, and their consequences: Situational features are inaccessible in other ways. People often have difficulty predicting how they will respond to situations that have significant emotional or visceral components.

Neglect of alternative scenarios – People mispredict future events because they neglect important information that they have in hand. When they spin scenarios about how they will behave in the future, they tend to dwell on positive scenarios and fail to take into account worst-case scenarios that they could easily generate.

Neglect of concrete detail -People also base their predictions about events in the distant future on abstract, higher-level features of a situation and give short shrift to more concrete, lowlevel features that can have a significant impact on behavior.

Neglect of background circumstances – People mispredict because their imagined scenarios concentrate too much on the behavior in question and not about seemingly irrelevant swirls and eddies of everyday life that are not conceptually related to the behavior but that may still interfere with their capacity to perform that behavior.

Neglect of the lessons of experience – People ignore their previous experience because they generally take an ‘‘inside view’’ rather than an ‘‘outside view’’ when predicting how quickly they will complete tasks . When people take the inside view, they consider the unique features of the task at hand and imagine a series of steps that will lead them from their starting point to a solution. As a consequence, they focus on their abilities and resources, perhaps envisioning obstacles and thinking about how they will overcome them. In contrast, when people take an outside view, they dismiss this scenario building focusing on the situation at hand and instead pursue a more data-driven strategy in which they just tally the final outcomes from situations they know of that are similar to the one they now face.

Implications to the workplace:

Accuracy of self-knowledge in organizations

The largest surprises generated by lack of self-knowledge may be those that are produced when self-evaluations are not echoed by supervisors who set raises and hand out promotions. If employees overrate their own performance, it is difficult to imagine how people could not wind up disappointed at least some of the time.

Zenger (1992) studied several hundred engineers at two high-tech companies and found that 32% of the engineers in one company and 42% in the other rated their own performance in the top 5% of all engineers.

Typically, the views of other people—subordinates, peers, and superiors—agree with each other more often than with self- views. Although the ratings of peers and supervisors agreed pretty well ( r = .62), their correlation with people’s own ratings of their job performance was lower ( r = .35 for supervisors’ ratings, r= .36 for peers’ ratings)

Challenges in providing employees with feedback

Actual feedback systems can become ineffective for the following reasons:

Feedback is infrequent

Feedback is threatening

Feedback is sugarcoated

Feedback is given too late

The burden of feedback systems falls especially hard on front-line managers, who have to give feedback that disappoints or angers employees who assume they are above average and cannot see why their managers do not agree. Because of these problems with giving feedback, many organizations evolve to an equilibrium pattern of feedback that may be suboptimal for organizational performance, but more viable from the standpoint of interpersonal relationships.

How, then, can organizations recognize and develop their best employees without undermining the motivation of the bulk of employees in the middle? One way might be to give high and low evaluations to a few exceptionally good and bad performers, respectively, and to give the bulk of the employees ambiguously positive evaluations. When any particular employee is singled out for special positive recognition, this makes many other employees—all those who correctly or incorrectly feel they are performing better—feel that their efforts have not been equitably rewarded. Organizations with positively skewed evaluation systems may get away with singling out a few really high performers—those who peers agree are clearly deserving—if they avoid tougher distinctions among people in the middle of the distribution, where quality distinctions may be more contested. Such evaluation systems cleverly allow organizations to select the best (and get rid of the worst) with the fewest ruffled feathers, but the problem is that these systems do not provide people in the middle of the distribution with an evaluation that may signal them to improve their performance. The overall results of such systems may depend on whether organizations can separate feedback from evaluation and provide feedback that encourages people in the middle to improve even though they are already being evaluated as ‘‘above average.’’

Cognitive repairs for mistaken self-judgment

For people at the bottom of a hierarchical organization, lack of self-knowledge may hinder career or personal success. Organizations often develop or evolve reminders, routines, and procedures that help mitigate problems that could be caused by employees who lack awareness of their own abilities:

Adding safety factors and buffer time

Forcing people to pay attention to the environment (“Don’t confuse brains and a bull market”)

Some common themes run through the literature on improving the accuracy of self-judgment. One theme that emerges from our review is that the road to self-accuracy may involve information from or about other people. Another theme, coming from the organizational literature, is that cognitive repairs can be applied to the kinds of self-judgments that are often made with error, thus sparing individuals and their organizations the costs associated with faulty self-assessment.

Benkler goes deep into the core purpose of the “traditional firm”, looking at it through the lens of innovation and production, and exploring the differences between it, and it’s almost polar organizational opposite “peer production”.

(a) decentralization of conception and execution of problems and solutions

(b) harnessing diverse motivations, and

(c) separation of governance and management from property and contract.

Under Coase Theorem, the firm in its traditional “managerial hierarchy” incarnation exists, since it offers a way to reduce the transaction costs of collaboration among its member.

However:

When technology dropped the cost of communications, distributed the material capital necessary for knowledge work throughout a large population, and allowed individuals to share designs and incremental improvements with each other, these individuals were able to pool their knowledge and resources, and coordinate action toward shared goals, without the mediation of firm hierarchies or markets

Leading to the emergence of alternative organizational forms to drive innovation and production such as peer product, open innovation, crowdsourcing, online labor markets, etc. They can all be integrated into a more holistic organizational framework illustrated here:

I’m intentionally glossing over the details here and jumping to the bottom line, which is:

Institutionally, that means that as knowledge development and production are more important, in a space that is at the outer frontier of knowledge and problem-solving, the more important it is to adopt an institutional framework that assures freedom to operate, a commons,

[W]hereas the more certain and understood the problem space is, the more firms in the space can focus on appropriation of the fruits of investment.

Now we get to the more interesting question that Benkler explores in this essay: given the decline in transaction costs, and the emergence of alternative organizational structures, is there still room for the traditional firm in the future of work?

The Coase-ian view provides one answer, that traditional firms will shrink to play a niche role in specific edge-cases:

One possible answer is that firms will remain significant only where physical capital costs of production are high and concentrated… firms will continue to play a role:

(a) when they have the advantage in amortizing high capital costs over many diverse innovation efforts, where optimization of that innovation and its manufacture and distribution are core necessities,or

(b) when exploiting legally-created rent extraction opportunities gives an advantage to a continuous legal entity such as a firm over a more fluid market relationship that comes together purely for the purposes of exploration and innovation.

However looking at some of the non-transactional challenges of the other forms of organizations, suggests a second answer, which is far more interesting, in my opinion:

a model of motivation that assumes that belonging to a socially-meaningful interaction is critical for engaging the full capacities of people suggests a continued role for firm that can integrate social meaning and relations into their organizational ethos and practice… [I]n the presence of substantially lower transactions costs and competition from nimble, flash organizations and non-market innovation, building communities of meaning around economic collaboration is the primary form of strategic advantage firms have over dynamic, fluid networks of collaborators.